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Reach the retirement goal

When talking to our clients on a daily basis, the word retirement usually comes up during our conversations. And it is usually referred to in the context, "I'll never accumulate enough money to ever consider retiring."

We disagree because of the time value of money. It's a fact that at a 9 percent return per year, money will double every eight years.

A million dollars may not be what it once was, but it is still an awesome figure...far more than most people accumulate in a working lifetime.

Early saving can produce some major lifetime benefits that include eliminating the need to save more, later, and for longer; you can end worries about Social Security; eliminate the worry about where the money will come from; and provide an above-average retirement income for as long as you live.

The following chart shows how that million-dollar goal can be reached.

Age 25...... $ 31,250
Age 33 .......... 62,500
Age 41.......... 125,000
Age 49.......... 250,000
Age 57.......... 500,000
Age 65....... 1,000,000

How can you obtain your goal? Contribute the money to an IRA. Whether the IRA contribution is tax deductible or not, the annual earnings are tax deferred, and a contribution of $2,000 a year will accumulate to the dollars you need. If, for example, you put aside $2,000 a year from age 21 to age 41 and earn 9 percent compounded, you will accumulate just more than $120,000. Similarly, if you put aside $2,000 a year from age 21 to age 33 and earn 12 percent (a return available in equities) you will have $62,000 by the time you are 33.

As difficult as saving for retirement is, once you get started it takes on a momentum of its own.

Most taxpayers are not sure whether they should make a contribution to an IRA (which is deductible) and pay the taxes when a distribution is made, or make a non-deductible contribution to a Roth IRA and take qualified distribution (which is not taxable). Additionally, the earnings from a Roth IRA are non-taxable. It is our feeling that if you are in a 15 percent tax bracket, it would make sense to put the money in a Roth IRA where you can compound the earning and get the money out tax-free upon proper qualifying distributions. The potential earnings would far outweigh the tax savings of a deductible IRA. If you are in a higher tax bracket, you may need to do further analysis before deciding on a regular or Roth IRA. Your age is also a determining factor. If you are going to be in an IRA more than five years, it is probably more beneficial to put the money in a Roth IRA (providing you are investing in stocks or mutual funds). If you are older and are going to qualify for a distribution in a few years and you are in a higher tax bracket, it may be beneficial for you to put the money in a regular deductible IRA.

A million dollars may not be what it once was, but it is still an awesome figure

When many of you feel there is no chance for a comfortable retirement, the above chart shows what can be accomplished through savings. For those of you fortunate enough to have time on your side, we have shown what a $2,000 per-year contribution to your IRA retirement plan can do for you.

This article has been presented by PBS Tax & Bookkeeping Service, a company that has been providing income tax and bookkeeping services to the trucking industry for over a quarter century. Contributions to this article were made by Shasta May, Director of Business Development for PBS. If you would like further information, please contact Barry, Howard or Shasta at 800-697-5153. Visit our web site at